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Old 02-22-2012, 09:56 PM   #1
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Un Permited Basement Additions


It appears a bedroom, bathroom, and bar with plumbing were added to a CA basement area without permits. 25 Years later, to buy this property and make serious renovations, the new permits will lead to discovery of the prior changes.

What are the consequences?

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Old 02-23-2012, 06:25 AM   #2
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Un Permited Basement Additions


Probably nothing---except you will be asked to correct any deficiencies in the original construction--

Talk to the building department and ask before you make plans--

How do you know that the original did not have a permit? Or that one was required at the time?

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Old 02-23-2012, 07:25 AM   #3
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For insurance reasons and resale of the house at some point you want to put all the permits needed now in place and that will mean correcting anything that was done Mickey Mouse. Hopefully the addition was done properly in which case you probably have nothing to worry about.

There was a great post on this site recently about how people should not fear the permit and inspection processes (save for municipalities hungry for revenue seem to add the need for permits for the silliest things). The inspectors really do provide a great service in keeping homes safe to at least minimum code standards.
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Old 02-23-2012, 09:52 AM   #4
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Un Permited Basement Additions


The assessment profile shows 3 bdrms, and there are 5. Not geting a permit avoids the increase in value, and taxes. I'd guess they avoided $2k for 25 years...
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Old 02-23-2012, 09:59 AM   #5
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Un Permited Basement Additions


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Originally Posted by sdsester View Post
For insurance reasons and resale of the house at some point you want to put all the permits needed now in place and that will mean correcting anything that was done Mickey Mouse.
In my experience, total nonsense. I have owned ten houses over the years, in all parts of the country. I have done unpermitted work on most, and some had obviously had unpermitted work done before I bought them. Never, not even once, has obtaining insurance or reselling the house been a problem. Unless a house is being sold "as is," substandard work may be a point for price negotiation, but that's about all.
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Old 02-23-2012, 10:05 AM   #6
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Un Permited Basement Additions


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Originally Posted by md2lgyk View Post
In my experience, total nonsense. I have owned ten houses over the years, in all parts of the country. I have done unpermitted work on most, and some had obviously had unpermitted work done before I bought them. Never, not even once, has obtaining insurance or reselling the house been a problem. Unless a house is being sold "as is," substandard work may be a point for price negotiation, but that's about all.
Try getting an insurance company to pay a claim against uninspected electrical. And in the State, any closing attorney will ask to see such inspection sign-offs before letting a client close.
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Old 02-23-2012, 10:33 AM   #7
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I work extensively for the insurance industry performing forensic investigations of damage claims from flood, windstorm, hail, impact etc. A lot of people are very confused about insurance policies and companies, probably because they have not read their policy, and even if they have, they probably did not understand it.

Very simply, in over ten years of work, I have never heard of an insurance company denying a claim on the grounds that the cause of the event was defective work, installation by an unlicensed individual, or the work was unpermitted. They are usually very interested in the cause of the problem, but this is often so the can subrogate (go after) the person who caused the problem.

For example, if your house burns down, and it turns out that there was a defective breaker, the insurance company may attempt to subrogate against the manufacturer. If the breaker was installed improperly, they may subrogate against the installer. I have never heard the issue of whether you got a permit or not brought up as a significant matter, certainly no insurance company has EVER asked me to determine if the work I inspected was permitted. They often ask if it met code at the time of installation, but I have never seen an insurance company pull permit records to see if the work was permitted. Perhaps someone on this forum has detailed, personal knowledge of an insurance company actually doing this, but I have never seen it happen in over 200 investigations.

By the way, stupidity and incompetence is NOT so far as I can tell grounds for denying a claim. For example, I have investigated damage incidents where the owner modified his structure WITHOUT a permit, causing structural failure of the building. The claim was paid, since building failure due to structural collapse was an insured peril. I do not know if the insurance company subrogated against the owner, I am not even sure if this is possible, perhaps someone on this forum is aware of the legality of an insurance company claiming against an owner for work done by the owner leading to a claim.

So on to the OPS question. I doubt the presence of unpermitted work is an insurance issue. It may be an issue with the town, they can tell you.
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Old 02-23-2012, 11:00 AM   #8
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Un Permited Basement Additions


^^ I was under the same impression.

When I bought my house and took out insurance on it, they did not ask me if permits were in my possession for previous renovations and/or upgrades. Therefore it would be impossible to prove who the perpitrator was.

Additionally, when I finished my basement, and had an electrician do all the wiring with a permit, I called my insurance company to inform them I had finished the basement (so they could adjust the value of the home) and they did not ask me whether plumbing or electrical was done, nor did they ask if I had a permit done for any modifications. I just think it's too difficult to point responsibility in any one direction.
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Old 02-23-2012, 12:23 PM   #9
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I think it's important to make a distinction between whether in practice insurance denies claim or coverage based on work done without a permit and whether they could do so in theory. Daniel Holzman's experience is interesting, but I think it doesn't speak to whether an insurance company COULD deny a claim or hold a homeowner responsible for damages. I think that ultimately you have to assume that it's a risk you are taking.

I think there is a lot of trust on several levels at play here. The insurance company trusts that they're insuring a properly built house, a bank assumes they're financing a properly built house and a buyer assumes they're buying a properly built house. If there's one thing to take away from Mike Holmes's show it's that that trust is often violated.

I can give examples of policy cancelation. When you get a policy, the insurance may do an outside inspection - often without your knowledge. Our first policy was cancelled due to the condition of the roof (which was being redone at the time of inspection) and driveway... Of course, there were much worse issues they didn't know about. We had used the same insurance the previous owners had, and according to the previous owners they had found they often had policies cancelled or had to make repairs to keep insurance on the house.
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Old 02-23-2012, 12:26 PM   #10
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Another note with consequences and an example, I had an electrical permit and inspections, had I not had those inspections I might have missed some of the grounding measures that are required, and without the full and proper grounding system the PoCo's subsequent open neutral problem could've started a fire that was prevented because my inspector ensured my ground system on the work I performed had been installed up to current code.
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Old 02-23-2012, 01:14 PM   #11
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Un Permited Basement Additions


Let me be clear for the record. I absolutely encourage folks to get a permit when required for many reasons, including the fact that it is a legal requirement, you get the benefit of the inspector's eyes, and it may avoid trouble down the line. Second, it is absolutely correct to note that insurance companies can and do cancel policies all the time for good reasons, and sometimes bad reasons, and sometimes so far as I can tell no reason at all. Doing work on your house without proper permit may lead to cancellation of your insurance policy.

The question the OPS asked was quite different. It has certainly been my experience that insurance companies pay claims when the cause is an insured peril, regardless of whether the peril arose due to faulty workmanship, stupidity, bad luck, or Act of God. The insurance company may well pay the claim, subrogate against whomever they think is at fault, and cancel your policy, but my point was that the insurance company is unlikely, in my experience, to deny a claim simply because the claim arose out of unpermitted work.
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Old 02-23-2012, 06:22 PM   #12
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Well... Actually the original question was more open ended, asking what the consequences are.

I think it's very important to emphasize that there are greater consequences than tax assessments or insurance implications. The greatest consequences come from the dangers that are associated with undetected code violations. Plumbing codes exist to prevent sewage from backing into your house, which is a real risk if things are done wrong below grade. Building codes that relate to bedrooms in a basement can have to do with being able to escape or get rescued in an emergency. The consequences can be the death of a child.

Now, towards that end, an inspection with an eye towards assessing code compliance might be more significant than a permit per se.

Also I don't know that I'd conclude there wasn't a permit based on a discrepency with the assessment. Check with the city's building department for permit history on the address. You can get this info in many cases at no charge.
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Old 02-24-2012, 10:21 AM   #13
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Un Permited Basement Additions


All good comments! One thing NOT having the permit may do, is if there were a fire or flood starting in the basement, the Insurance company could try and deny the claim.... You may want to check.
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Old 02-24-2012, 11:22 AM   #14
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OK Denverbasement, I get it that you totally disagree with my experience that an insurance company will not deny a claim based on the fact that the work was unpermitted. So do you have actual knowledge of a denied claim arising from fire or flood from a basement, where the basis of denial was that the work was unpermitted? My point is that insurance claims are paid or denied based on whether the claim arose from a covered peril, whether or not that peril arose from permitted or unpermitted work is irrelevant so far as I know from my personal experience dealing with insurance companies as a forensic investigator. I am very interested in the source of your information.

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